The cost of long-term care in your state

By Anne Tergesen

Whether you’re in market for long-term-care insurance or not, you owe it to yourself to take a look at some new data that documents the cost of long-term-care—both at home and in assisted living facilities and nursing homes.

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This’ll cost you around $45,000 a year.

The long-term-care industry’s biggest player, Genworth Financial Inc.
/quotes/zigman/340124/delayed/quotes/nls/gnwGNW, has been tracking this data for 11 years in its annual Cost of Care Survey. Genworth, of course, stands to benefit when consumers decide to buy long-term-care coverage, but outside observers regard the insurer’s data as a useful resource to help you gauge the future cost and figure out whether to buy a policy.

According to academics at Georgetown and Penn State universities, about 70% of individuals 65 and older will need long-term care—whether at home or in an assisted-living facility or nursing home. On average, women need 3.7 years of care, while men need 2.2 years. For 11% of men and 28% of women, the duration is five or more years.

To use the Genworth data, the first step is to think about where you are likely to live when you might need coverage. Genworth’s 2014 survey, which came out in late March, shows how widely costs range across the country. (The survey covers over 14,800 long-term care providers in 440 regions. To gauge the cost of care in your area, click on the map on the Cost of Care web page.)

Nationwide, the average cost of “homemaker services”—where someone comes in to perform household chores—is $19 an hour. For 44 hours a week of service, that translates to $43,500 a year. But in Massachusetts, Vermont, and New Hampshire, the tab is $56,000, while in Louisiana, it is $32,000.

The cost of a home health aide—a professional who provides help with dressing, bathing and other forms of personal care—is $20 an hour, on average, or almost $46,000 a year. For adult day care–group care that typically takes place in a community-based setting during working hours–the tab is $65 a day, or $16,900 a year. Assisted living runs $42,000 a year, on average, while a private room in a nursing home costs $240 a day—or $87,600 a year.

Against these potential expenses, retirement savers need to balance the costs of buying insurance in the present. A 55-year-old couple, for example, can expect to spend about $3,275 in annual premiums for $164,000 of annual coverage for each that grows by 3% a year, according to the American Association for Long-Term Care Insurance, a trade group for insurance agents.

Those who decide to buy a policy should also consult the data to get a sense for how much inflation protection they might need.

Although buying inflation protection can add 50% or more to the cost of a premium, many financial experts say it’s a big mistake to go without it. If you buy coverage in your mid-50s and don’t need it until your mid-80s, “thirty years of inflation is going to eat into the benefit,” says Howard Gleckman, a resident fellow at the Urban Institute.

In the past, 5% compound inflation protection was the default for many policyholders. These days, with the average rate of inflation over the past five years for home care and nursing-home care at relatively low rates, carriers and agents are pushing new and less-expensive options—including coverage that keeps pace with the consumer-price index or that grows 1%, 2%, 3% or 4% a year. (According to the Genworth survey, the five-year rate of inflation for assisted living is 4.29%; For a home health aide, it is 1.32%.)

While 70% of adults say they want to remain in their homes, not all will be able to do so. Thomas McInerney, president and CEO of Genworth, says that while 71% of the company’s first claims are for home care, for last claims, the number falls to 63%. As a result, it’s best to factor some institutional care into your plans, he adds. For that, you should look at policies with inflation adjustments in the 3% to 5% range.

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Encore looks at the changing nature of retirement, from new rules and guidelines for financial security to the shifting identities, needs and priorities of people saving for and living in retirement. Our lead blogger is editor Matthew Heimer, and frequent contributors include editor Amy Hoak, writer Catey Hill, and MarketWatch columnists Elizabeth O’Brien, Robert Powell and Andrea Coombes. Encore also features regular commentary from The Wall Street Journal retirement columnists Glenn Ruffenach and Anne Tergesen and the Director of the Center for Retirement Research at Boston College, Alicia H. Munnell.